On 17 January 2011, Treasury released draft amendments designed to clarify the scope of the definition of “reportable employer superannuation contributions” (RESC). That definition is contained in section 16-182 of Schedule 1 to the Taxation Administration Act 1953 (Cth).

The draft legislation will amend the definition of RESC with effect from 1 July 2009 (when the original definition was introduced) to exclude particular contributions required by an Australian law over which an employee and their employer have no real capacity to influence. The draft amendments will not affect the inclusion of contributions made under a formal salary sacrifice agreement which an employee has capacity to influence.

The proposed amendments follow an announcement on 30 June 2010 by Mr Chris Bowen, the former Minister for Financial Services, Superannuation and Corporate Law, to remove unintended consequences. Under the current law, RESCs have included additional employer contributions prescribed in legislation that are not capable of being influenced by the individual or their employer. In Mr Bowen’s announcement, he stated that this was not the Government's intention and that the law would be amended retrospectively.

If the proposed amendments are adopted in their current form, RESCs will be those contributions that an employer makes for an employee where all of the following apply:

  • the employee influenced the rate or amount of superannuation their employer contributes for them,
  • the contributions are additional to the compulsory contributions that an employer must make under any of the following:
    • the superannuation guarantee law
    • an industrial agreement
    • the trust deed or governing rules of a super fund, and
    • a federal, state or territory law.

Comments on the draft legislation closed on 11 February 2011.

The draft amendments and the draft Explanatory Memorandum are on Treasury’s website.

In the meantime, employers will need to review current reporting systems to ensure that they can address these potential changes.

Selecting default super funds – Productivity Commission asked to help

In a separate development, on 17 January 2011, the Senate asked the Productivity Commission to create a new process for the selection and review of default superannuation funds under modern awards. The report from the Productivity Commission is due to be tabled in the Senate by 31 May 2011.

We expect that the Productivity Commission will focus its review on developing suitable objective criteria which could be applied in the selection of default superannuation funds.